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Wednesday, 1 November 2000
Page: 21797


Mr NAIRN (10:00 AM) —It is interesting that the opposition have sent the member for Paterson in here to have a few words on this particular bill. I think they were embarrassed yesterday when the only speaker from the opposition on what is a very important bill for the wool industry and for the country, given the ongoing benefits of the wool industry, was the shadow minister for agriculture. Obviously, he had to speak and I think that probably he even found that difficult. I think they realised just how important this was and felt the need to send somebody along to say a few extra words to show some sort of feigned concern about the wool industry, so they threw in the member for Paterson to do his little bit.

I certainly want to commend the Wool Services Privatisation Bill 2000. This legislation allows for the privatisation of the wool industry services provider, the Australian Wool Research and Promotion Organisation, AWRAP, and its operating subsidiary, the Woolmark Co. Passage of this bill will pass ownership of the management of wool industry services into the hands of wool growers, a move that will be welcomed by wool growers in my electorate of Eden-Monaro—and there are many of them; some of the best fine wool comes from Eden-Monaro down there on the Monaro—and all the wool growers right around Australia. This is what they have been working towards for quite some time. It greatly reduces the government's involvement and is a strong example of the government and industry working together to achieve a common goal.

I thought it was interesting, listening to part of the shadow minister's comments yesterday, that, when you really look around what he was saying, you realise he was basically saying the Labor Party, as usual, cannot let go of control. They love to control everything. Really, for all the so-called concerns and various things that he was expressing, at the end of the day it was like the new parent taking their first child off to kindergarten: the parent could not quite let go of the child's hand to go off into the great wide world on their own. That is really what the opposition is all about; they really do not want to let go of control of an industry.

Honourable members interjecting


Mr DEPUTY SPEAKER (Mr Jenkins)—Order! The minister and the honourable member for Paterson!


Mr NAIRN —Thank you, Mr Deputy Speaker. It is a bit difficult to speak with this sort of chatter there at the table. The privatisation of AWRAP is part of a larger process to enable the wool industry to assume ownership of its service delivery body and for it to be accountable to levy payers as shareholders. Rod Price, as chairman-designate of the new company, says this change marks `an exciting new era' for wool growers. He says:

The Government will no longer control the expenditure of wool levy funds, and these funds will only be invested in a contestable manner. The Board of Australian Wool Services will be accountable to woolgrowers for the company's performance.

Mr Price is well qualified to hold this position. He is a former director of John Fairfax Holdings and of the US and UK subsidiaries of Brierley Investments Limited. He is a former managing director of Pioneer International Limited. He was also a member of the Wool Industry Review Committee and the Australian Wool Industry Council.

The process to establish the best structure to replace AWRAP has been comprehensive and well supported by wool producers. AWRAP is a Commonwealth statutory corporation which was established in 1993 under the Australian Wool Research and Promotion Organisation Act. Its functions include undertaking generic promotion of wool and wool products and providing funds for research and development in the wool industry. AWRAP's funding has come from a wool tax which is levied by the Commonwealth on sales of wool and by a matching Commonwealth research and development contribution. Those wool growers who pay the wool tax do not hold shares or have any other proprietary interest in AWRAP, other than being able to participate in an annual general meeting of AWRAP under special provisions contained in the AWRAP Act.

A motion of no confidence passed by wool growers, which we all remember quite well, at the November 1998 AWRAP annual general meeting led to the government establishing the future directions task force to investigate the available options for the future of the wool industry. Their recommendations, contained within the McLachlan report released in June 1999, reflected four major principles—wool growers should take individual responsibility for their business and their fibre, the industry should explicitly accommodate diversity of supply, the industry should explicitly accommodate diversity of demand, and the government should only intervene in response to clear market failure. The report recommended that AWRAP be replaced with a Corporations Law company limited by shares owned by wool growers.

In September 1999 the government announced an eight-point plan for implementing the task force report. The plan, which was subsequently endorsed by the National Woolgrower Forum and other key stakeholders, mainly concerned the establishment of a wool working party to conduct—and report on—a vote among wool growers to determine their opinion. As such, a voluntary wool grower poll, known as Wool Poll 2000, was conducted in March this year. In line with the task force report, the working party assumed services would be delivered by a shareholder company owned mainly by wool growers. The preferred outcome from this poll was a two per cent wool tax to be invested in research and development, technology transfer and delivery of some information services. In line with the Wool Poll result, the wool tax rate was lowered from four per cent to an interim rate of three per cent as at 1 July 2000. This will cover the costs of transition to a predominantly research and innovation body, and from a government authority to private ownership. As soon as these costs are met, following the establishment of the new arrangements, the levy will be further reduced to the two per cent.

The bill provides that AWRAP will be converted to a Corporations Law holding company limited by shares, with shares to be issued to Australian woolgrowers. The company will be called Australian Wool Services Ltd, AWS, and will have two principal subsidiary companies. Of note is that the boards to be established under the new arrangements will be responsible primarily to shareholders rather than to the government, as is the current case. Shareholders will receive annual reports and audited financial statements and may vote at general meetings. All AWS directors will be required to stand for election by rotation. One subsidiary, CommercialCo, will be responsible for commercial activities, including the commercial development of the Woolmark and its sub-brands and the commercialisation of intellectual property matters. The other subsidiary, R&D FundCo, will manage the proceeds from the wool levy and outsource research and development and intellectual property management. These arrangements also foreshadow that after a transition period of 12 to 24 months the board of the converted AWRAP may consider the option of dissolving the converted AWRAP, leaving the two subsidiaries as separate commercial entities directly owned by shareholders.

Whilst the government is committed to minimising its involvement in the new arrangements, as long as payments continue to be made to the company by the government it is appropriate for the government to responsibly monitor the expenditure of those payments. Therefore, this bill does provide for the government to enter into a contract with the company in relation to payments of wool levy and matching R&D contributions. The government's role will be to collect wool levy funds, contribute funds for R&D, audit the expenditure of these funds and ensure accountability to parliament and taxpayers. The government will have no representation on the boards of AWS and its subsidiaries. To ensure that AWRAP staff are transferred to the new arrangements without breaching their employment contracts, a strategy is currently being developed.

This bill also allows for the establishment of the wool levy to replace the wool tax. The establishment of the wool levy will help in the future conduct of wool levy ballots and will assist to maintain the accuracy of the shareholder register by ensuring wool levy information is passed on to the register managers. A wool poll will be held at least every three years for the purpose of setting the levy rate. These changes will allow for wool growers to take responsibility for the management of their assets. They will have a real say in the operation of the company, there will be contestability and transparency in the expenditure of wool levy funds and the focus of investment will be on innovation. Change and innovation are needed due to a low demand and poor prices for wool over the last decade and due to a general uncertainty felt by many. Globally, we have seen changing consumer preferences, and the rise of synthetics, wool blends and fibre substitutes have a significant effect on the local market.

Concerns had arisen that AWRAP was focused too heavily on consumer promotion and too lightly on research and development. Under the four per cent wool tax regime, AWRAP spent only around 40 per cent of its annual budget on R&D and innovation activities. Substantial funds were spent on licensing of the Woolmark and promotional activities. A key focus of AWS will be wool product innovation and the strategic marketing of new wool products to optimise their uptake. Levy funds will no longer be used for generic promotion activities.

Privatisation of AWRAP and the formation of AWS is expected to occur on 1 January 2001 or as near to that date as possible. From that time, the company will be in the hands of the board and its shareholders. All wool tax payers are entitled to register for shares in the new company. Share registration kits have already been mailed out to wool growers and brokers across Australia. The kits outline the new structure for AWS, and enclose a share registration form to be returned by 30 November. Shares and voting entitlements in AWS will be allocated for each $100 of wool tax paid over the three financial years ending 30 June 2000. No income tax or stamp duty will be payable by wool growers upon the issue of shares in AWS. Upon the separation of ownership of the two subsidiaries, no income tax or stamp duty will be payable on the issue of shares in exchange for AWS shares, provided this occurs within two years of the formation of AWS. Capital gains tax may be payable on the disposal of shares in AWS or the disposal of any shares received in exchange for AWS shares.

Wool growers will be required to support their registrations for shares by providing documentary evidence from an independent third party which shows the wool tax payer's name and address and the amount of wool tax paid in respect of wool sold on a particular date or in the financial years ending 30 June 1998, 30 June 1999 and 30 June 2000. Examples of acceptable documentary evidence include: `account sales' issued by registered wool tax agents to the person at the time of wool sales made by the person; statements from registered wool tax agents describing the amount of wool tax deducted by the agent from the proceeds of wool sales made by the person in each of the relevant three years; and invoices issued by registered wool tax agents to the person at the time of manufacture or export of wool by the person.

As a shareholder in AWS, wool growers will have a real say in how their wool levies are invested and will participate in the commercial success of the enterprise. These changes have been instigated by wool growers themselves. A couple of weeks ago the Woolgrowers Advisory Group, WAG, warned federal politicians that they would be ignoring the wishes and interests of wool growers if the legislation to privatise the Australian Wool Research and Promotion Organisation failed to be passed by the parliament. They were responding to reports that some members of the Senate committee examining the legislation were considering opposing its passage until the resolution of the dispute between AWRAP and Cape Wools South Africa. I note that some of those people were given great accolades by the shadow minister yesterday in saying these were the right sort of people to make these decisions. Their background was the usual one of being union employees and nothing much more than that, but he seemed to think they were probably the greatest experts you could ever put forward to make recommendations on this particular matter, which I thought was quite amusing. I quote from the Woolgrowers Advisory Group:

Woolgrowers have been waiting a long time for the chance to take control of their industry's research and development activities, and there will be a lot of anger out in the paddocks if this process is blocked.

It is almost two years since the Goulburn meeting that passed a vote of no confidence in the previous Board of AWRAP and demanded that control of AWRAP be handed over to woolgrowers.

A succession of government-appointed AWRAP Boards have failed to deliver commercial outcomes for woolgrowers. The Board of the woolgrower owned AWS will be best placed to lead negotiations with Cape Wools South Africa in the interest of Australian woolgrowers. The AWS Board will be fully accountable to woolgrowers.

The very suggestion that the privatisation be delayed until the government appointed AWRAP Board resolves the Cape Wools matter is exactly the sort of political interference and paternalism we're trying to put behind us.

I wholeheartedly support that, and the wool growers in my electorate wholeheartedly support that. I have not been a wool grower, but my first job when I left school was working in the Dalgety wool stores—as a member of the Storemen and Packers Union, I recall. I was not allowed to go and work there after school unless I joined it, and I had to go to the union directed blacksmith to buy the union directed wool hook to be able to work in those stores. I have had enormously fond regard for wool ever since those days. It is a great product, and it really should have greater prominence in the world than it does today. A lot of that has to do with far too much government involvement in the industry over a long period of time.

Yesterday the member for O'Connor constantly talked about the opposition and the wool growers as being almost together. I do not think the opposition have really talked to many wool growers at all. They cannot have talked to many wool growers because, if they had, they would have heard those wool growers urging them to get out of the way and to let this legislation through. Yesterday evening in Parliament House I attended a meeting with a number of farmers from my electorate of Eden-Monaro who came here to talk to me about a whole range of matters. As they were leaving, they said, `By the way, you've got to get that wool privatisation bill through.' I said, `I'll be talking on that tonight,' as I thought I would be speaking on this last night instead of this morning. Let me quote some of the things that they said in talking about the possible blocking of this legislation. These are direct quotes from their comments:

We don't want political interference—[it is] just plain politics.

The next one is very significant:

They will put us in a weak bargaining position.

It is absolutely stupid if they block this legislation.

The legislation is going absolutely in the right direction and we don't need any more delay.

Their message, and the message from the Woolgrowers Advisory Group, is extremely clear: pass the legislation and let the wool growers get on with the job of furthering their business. They know, and a string of government appointed AWRAP boards know, that only the people working in the industry can really know what will work best for the future success of the wool industry. I join these organisations in their call. I urge all members to support this bill, and I hope for its speedy passage through parliament.